“While VIL may be able to sustain over next two years with the spectrum and AGR payment deferment, our cash flow analysis suggests that business viability is under cloud even at Rs 200 ARPU (Average Revenue Per User) and subscriber base of 280 million once the deferred spectrum payment resumes in FY23,” brokerage agency Credit Suisse stated in a report on Tuesday.
The telco’s shares misplaced 15.36% to shut at Rs 4.85 a chunk on BSE Tuesday. The trade’s benchmark index, the Sensex, misplaced 2.58% or 810.98 factors.
The Department of Telecommunications (DoT), had on Monday sought the Supreme Court’s permission to permit telcos to unfold out stability AGR dues over a interval which can go as much as 20 years at a reduced price of 8% to guard net-present worth.
“Considering the balance liability of Rs 15000 crores based on VIL’s self-assessment, the average annual instalment with 8% fixed interest amounts to Rs 780 crores. For a company which is making annual cash loss of Rs 10,000 crores, coughing up this amount is a remote possibility,” stated an analyst who didn’t want to be quoted.
As per HSBC Global Research estimates, VIL would require an ARPU improve of 5% (from Rs 122 in Q4FY20) to have the ability to generate incremental money for annual instalments, primarily based on its self-assessment.
Emkay Global additionally believes an annual payout of Rs 750 crores will not be a problem within the close to time period for the telco.
“Real pain will begin in FY23 when VIL will have to shell out Rs 12,000 crore as deferred spectrum payments which would drive back the company to reduced cashflows again and it lacks clarity on total penalty amount and quantum of staggered payout,” stated an analyst at Emkay Global Financial Services.
Credit Suisse estimates VIL would want ARPU ranges of Rs 230 to attain money circulation breakeven submit FY23.
The authorities can also be contemplating a broad bundle for the competition-stricken and debt-ridden trade, together with offering sovereign assure of 15% of AGR dues if an operator have been to method a public-sector financial institution (PSB) for mortgage.
“The staggered payment plan along with 15% sovereign guarantee provision for the telcos to raise debt from PSBs will allow Vodafone Idea to survive but it is still a discomfort considering the stretch on its balance sheet,” stated Rohan Dhamija, associate & head of India & Middle East at Analysys Mason.
Besides this, the discrepancy within the DoT’s and telcos’ AGR estimate will take 9-12 months to get resolved and will doubtlessly lead to one other authorized battle if each events keep a recalcitrant perspective, Credit Suisse stated.
Vodafone Idea until date has paid the principal portion of Rs 6,854 crore out of whole statutory dues of Rs 21,633 crore, as per its personal evaluation. Whereas, in line with DoT math, the corporate general owes Rs 58,254 crore. The DoT had stated that the reduction measure will likely be relevant to reconciled figures between two events.
“A 20% tariff hike from current rates along with TRAI setting a price floor is crucial at this juncture for Vodafone Idea to run business sustainably. It also depends on how it runs its operations and contains its customer churn,” Dhamija stated.
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